CFO Services | The Difference Between Contractors And Employees
Business owners who donít know the difference between contractors and employees, often make serious hiring errors that can come back at them much later in their business and financially crush them says CFO services. By retroactive payroll remittances, interest on those payroll remittances plus interest because their contractors have been deemed employees by the CRA. Business owners should be very prudent when hiring, to ensure that employees they hire are hired on properly the correct payroll remittances coming off of their paycheck. Business owners should be sure that there contractors have their own corporations set up in order for CRA to never deem their contractors to be employees.
Business owners often hire employees as contractors in order to avoid taking of the CPP and EI of their paycheck, however they must be extremely careful how they do that, because be run the risk of CRA deeming those contractors employees if they donít have their own corporation says CFO services. Often business owners of started their business with this mistake, and has never corrected it because they believe that since theyíve never been caught, that they wonít ever be. This assumption could be catastrophic on their business, because the longer theyíve been making this error, the higher we must theyíll have to pay will be. CRA will not only find the business, they will also ensure that all of the most payroll remittances will be paid back since the very beginning of that personís appointment with the business. There is interest charges on top of that, plus penalties.
Many big successful companies completely avoid this issue altogether by ensuring that in contractors that they hire have their own corporations set up. This is the simplest and easiest way to ensure that CRA will never deem those contractors as employees. This completely eliminates the risk for hire contract. Businesses can follow suit, and it is our practice into their own business to completely avoid this risk. The CFO services says that if business owners have already made this error, it is an extremely easy one to fix. All they need to do is either switch those contractors to employees by ensuring that the correct deductions are taken of their paycheck, or they can request that contractors are working for them become incorporated. An easy way to ensure that those employees donít have any problems with having to pay taxes all the sudden, or in costs with incorporation, is that business owners can organize these changes to happen those people are do pay raises. A business owner can that those employees know that they will get a raise, at the same time you have the remittances, of the check, these those employees will be less upset having to pay for taxes, sincerely making more money. In contractors will be less likely to be upset at the cost of the corporation, if they know they will be making more money as well.
Is extremely easy way to ensure that businesses were the payroll audit by CRA and get assessed for several thousands of dollars worth of charges says CFO service. Then extremely easy way for business owners to fix this error. There should be no way any businesses should ever have this happen to them.
50% of all businesses are out of business in five years, and 29% of those failed businesses will cite that they ran out of cash says CFO services. The last thing business owners need is to be hit with retroactive payroll remittances, penalties and interest charges because there contractors have been considered employees by CRA. Businesses who have been hit with this, extremely hard time paying this, especially because cash flow is a problem in most small businesses. In order to completely avoid this problem, businesses can do a few simple things.
The first thing that business owners can do to completely eliminate this problem from the beginning, is to ensure that any contractor that they hire has been incorporated. Incorporated contractors will never be deemed employees by CRA, so entrepreneurs can be completely sure that they will never run into this problem if they put this hiring practice in their business says CFO services. They can further ensure that, by ensuring their employees have the correct payroll is deducted of their paycheck, they will never be necessary for those reasons. Hiring employees is no problem, corporate contractors is no problem, because both ways CRA gets there taxes. However the problem is when incorporated contractors are hired because CRA doesnít get there taxes and thatís a problem.
Many business owners lulled into a false sense of security believing that since it would doing this for a long time, and have never been caught, that they never will get caught. This is extremely problematic because chances are CRA will eventually find out that theyíre doing this, and when they do, the longer business owner has been doing this will mean the more money they eventually will be with to pay back. Business owners also believes that if CRA does assess them, they will either be able to convince the CRA to be want them to, or that they will have the ability to appeal the decision. This is extremely rarely the case says CFO service. CRA will be extremely judicious and who is deemed a contractor, because that is how they collect their taxes. Itís a very fact-based process, the auditors are going to do their own research, interview the business owner, employees, contractors and may even call the business to speak to various people in order to figure out who is contractor and who is an employee. When they made their decision, they are able mail the business owner assessments, and they will have to pay.
The amount that businesses will have to pay if they have been assessed says CFO services quite high. Not only have to pay each source deduction that should have been debates with the beginning of that employees time of the company, but they will also be hit with interest those amounts plus penalties. Depending on how many contractors that have been employees and how long they been working with the company, this can be a massive amount.